The promising electric car Tesla gathered reporters in a Santa Monica airport hangar one afternoon in July 2006, it was the unveiling of the battery-powered roadster, a daring $ 100,000 two-seater in which few auto industry experts saw much hope. of success.
Martin Eberhard, the company’s brash and savvy CEO, declared that Silicon Valley ingenuity would teach Detroit’s auto giants how to make attractive zero-emission cars. Tesla’s first effort, a modified Lotus Elise chassis with 7,000 small lithium-ion cells, was a high-end concept that would soon be followed by a lower-priced family sedan, the CEO said. The vision he presented that day was finally fulfilled, but not with him in charge.
Tesla this month became the first automaker to achieve a staggering $ 1 billion valuation, but the CEO who introduced the company to the press 15 years ago did not become synonymous with the brand.
And he certainly didn’t end up as the richest person in history. That’s Elon Musk, of course, Tesla’s first investor and current CEO of the company. Musk was also present at Tesla’s debut in 2006, but took a lower profile that day, mainly arguing the need to get cars away from gas as quickly as possible.
Tesla’s original CEO Eberhard and another early executive named Marc Tarpenning, who in 2003 dreamed up the idea of naming the company’s vehicles after inventor Nikola Tesla, are the original shareholders of Tesla, the first men to claim ownership. of the upstart brand that would keep him going to shake the establishment from Detroit.
But none of them held enough Tesla shares to achieve billionaire status, much less Musk’s current net worth than Forbes estimated at $ 271 billion. It was Musk’s seed capital, the result of an early investment in payment processor PayPal, that made Eberhard and Tarpenning’s vision a reality.
Ultimately, it also put Musk on a path to taking full control of Tesla by steadily increasing his ownership stake in a series of nine financing rounds prior to the company’s 2010 IPO, each of which diluted. even more the bets of Eberhard and Tarpenning. Even today, Musk’s stake grows as he continues to receive quarterly stock awards, rather than salary, worth billions of dollars.
In an interview, Eberhard says he retains a “relatively small” stake in the automaker, though he declines to be specific. “I sold a good part of my stock a long time ago,” says Eberhard, 61, from his home in the San Juan Islands of Washington state. “People somehow have the idea that I was a billionaire when I started Tesla. It was not.”
If Eberhard had been richer by selling the Rocket eBook reader, one of the first handheld e-books he and Tarpenning created in the late 1990s, there would have been no need to seek seed funding from Musk, he says.
Musk has often said that he doesn’t care about wealth and sold his Los Angeles mansions last year to live in a humble manufactured home on his SpaceX campus in Boca Chica, Texas. Yet it continues to accumulate wealth at a remarkable rate. That’s due to a nearly 20% initial ownership stake in the company and a long-term compensation plan announced in 2018 that brings you billions of dollars in additional Tesla stock each time you hit quarterly performance targets. based on financial and valuation metrics. (It is also preparing to sell 10% of its stake, worth about $ 15 billion as of November 9, to avoid a massive tax shock as some long-term options mature.)
‘I have no Tesla stock right now. Of course I can’t imagine a $ 1 billion valuation! ‘
Ian Wright, co-founder of Tesla
Meanwhile, Eberhard sold much of his stake after being ousted from Tesla in 2007, prior to the launch of the Roadster. He sued Musk in 2009 for his impeachment and defamation, before settling the case on undisclosed terms. As part of a deal, they abandoned opposition to Musk, Tesla’s former chief technology officer JB Straubel, and Ian Wright, one of the company’s early engineers, also called co-founders, in addition to him and Tarpenning.
“When I got kicked out of Tesla, I had no money, I mean, I really had no money,” says Eberhard. “Worse than that, I was unemployed for about a year” due to a restrictive intellectual property deal with Tesla, he says. “I did not participate in any investment round after I left.”
Eberhard does not provide details about his stake in Tesla, but confirms that he is not a billionaire. Tarpenning, currently a partner at Spero Ventures, a Silicon Valley venture capital firm, has said that he, too, still owns Tesla stock, but is not among its major shareholders. He did not respond to questions from Forbes.
Of the five official co-founders, only Straubel, who left Tesla in 2019, is likely to have achieved billionaire status thanks to his holdings. Your stake may be worth around $ 1.3 billion, assuming you retain a significant portion of the Tesla stock you had when you left. Straubel, current CEO and co-founder of battery recycling startup Redwood Materials, declined to comment on the matter. Engineer Wright, who joined Eberhard and Tarpenning a few months after they created Tesla, left in 2004 to start another electric vehicle company. He sold his stake years ago.
“I have no shares of Tesla right now,” he tells Forbes . “Of course I can’t imagine a $ 1 billion valuation!”
Beyond making Musk the world’s richest person, the company that has become synonymous with a global automotive revolution has also enriched investors and board members, including venture capitalist Ira Ehrenpreis and Larry Ellison of Oracle, as well as Elon’s younger brother Kimbal, and countless investors inspired by the potential of a clean energy future.
“Whatever my take on Musk, I’m still very happy to see the electric car revolution, which we started after all, I wish that revolution would win.”
Martin Eberhard
Despite the company’s success in the electric vehicle industry and new financial stability, as well as the uninterrupted attention that Musk seeks and generates, Tesla’s early days were marked by a high degree of management and strategic turbulence that left a single co-founder in control.
Other tech-oriented giants that reached trillion-dollar valuations, such as Microsoft and Alphabet, created several billionaires among their co-founders, although Musk’s singular financial gains are not all that unusual.
“While it seems true that other notable tech firms had multiple financial winners, a somewhat similar dynamic at Tesla played out at Apple,” says David Hsu, a professor of management at the Wharton School of the University of Pennsylvania.
Co-founder Steve Jobs’s Apple stake was worth an estimated $ 2 billion at the time of his death in 2011 and Steve Wozniak’s wealth is roughly $ 100 million, though Ronald Wayne, Apple’s little-known third co-founder , he sold his stake early for $ 800, Hsu says. Musk’s rewards today simply flow from a risky early bet that paid off for him.
“It’s not just about the co-founders’ ownership stakes; We could also point to instances where investors get lost, including angel and venture capitalists, ”Hsu said. “By the time Musk invested in the Series A round, and for a considerable amount of time afterwards, there was a lot of uncertainty about the company’s ability to execute on its bold vision. Some might argue that the sentiment is still true today. ”
Citing a “no disparagement” clause that was part of the 2009 deal, Eberhard refuses to elaborate on his views on Musk these days. By contrast, Musk himself has shown much less restraint. He described Eberhard as “literally the worst person I’ve ever worked with” in a January 2020 interview for the Third Row Tesla podcast, hosted by Musk fans.
Still, the company’s original CEO, who owned “just under” 5% when he left Tesla, says he’s not unhappy these days, even though he doesn’t benefit more from its increase.
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“Valuation is what it is. What makes me happy is the success of the company. It is crucial that we stop using fossil fuels and Tesla has been the main driver of that, which is what we expected from the beginning, ”says Eberhard.
“Whatever my take on Musk, I’m still very happy to see the electric car revolution, which we started after all, I wish that revolution would win. Have to.”
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